Organization and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2016 |
Organization and Summary of Significant Accounting Policies | |
Organization | (a) Organization USA Compression Partners, LP (the “Partnership”) is a publicly traded Delaware limited partnership formed to own its subsidiaries, through which it operates the business. The common units representing limited partner interests in the Partnership (“common units”) are listed on the New York Stock Exchange (“NYSE”) under the symbol “USAC.” USA Compression GP, LLC, the general partner of the Partnership (the “General Partner”), is owned by USA Compression Holdings, LLC (“USA Compression Holdings”). Unless the context requires otherwise, references to “we,” “us,” “our,” or the “Partnership” are intended to mean the business and operations of the Partnership and its wholly owned, consolidated subsidiaries (the “Operating Subsidiaries”). The Partnership, through its Operating Subsidiaries, provides compression services under term contracts with customers in the natural gas and crude oil industry, using natural gas compression packages that it designs, engineers, owns, operates and maintains. The unaudited condensed consolidated financial statements include the accounts of the Partnership and the Operating Subsidiaries, and all intercompany balances and transactions have been eliminated in consolidation. The Partnership’s ownership is as follows: September 30, 2016 USA Compression Holdings Public Total General partner interest % — % Limited partner interest % % % Total % % % Partnership net income is allocated to the partners, both general and limited, in proportion to their respective interest in the Partnership. |
Basis of Presentation | (b) Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Partnership have been prepared on the same basis as the audited consolidated financial statements included in the Partnership’s annual report on Form 10-K for the year ended December 31, 2015 filed on February 11, 2016 (our “2015 Annual Report”). In the opinion of the Partnership’s management, such financial information reflects all adjustments necessary for a fair presentation of the financial position as of September 30, 2016 and December 31, 2015, and the results of operations for the three and nine months ended September 30, 2016 and 2015, changes in partners’ capital for the nine months ended September 30, 2016 and the statements of cash flows for the nine months ended September 30, 2016 and 2015 in accordance with U.S. generally accepted accounting principles (“GAAP”). Operating results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Therefore, these consolidated financial statements should be read in conjunction with the Partnership’s audited consolidated financial statements for the year ended December 31, 2015 contained in our 2015 Annual Report. |
Use of Estimates | (c) Use of Estimates The unaudited condensed consolidated financial statements of the Partnership have been prepared in conformity with GAAP, which includes the use of estimates and assumptions by management that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent assets and liabilities that exist at the date of the unaudited condensed consolidated financial statements. Although these estimates are based on management’s available knowledge of current and expected future events, actual results could differ from these estimates |
Inventories | (d) Inventories Inventory consists of serialized and non-serialized parts used primarily in the repair of compression units. Serialized parts inventory is valued at the lower of cost or market value using the specific identification method, while non-serialized parts inventory is valued using the weighted average cost method. Purchases of these assets are considered operating activities in the Unaudited Condensed Consolidated Statement of Cash Flows. Significant components of inventories as of September 30, 2016 and December 31, 2015 are as follows (in thousands): September 30, 2016 December 31, 2015 Serialized parts $ $ Non-serialized parts Total Inventory, gross Less: obsolete and slow moving reserve Total Inventory, net $ $ |
Identifiable Intangible Assets | (e) Identifiable Intangible Assets As of September 30, 2016, identifiable intangible assets, net consisted of the following (in thousands): Customer Non-compete Relationships Trade Names Agreement Total Net Balance at December 31, 2015 $ $ $ $ Amortization Expense Net Balance at September 30, 2016 $ $ $ $ Identifiable intangible assets are recorded at cost and amortized using the straight-line method over their estimated useful lives, which is the period over which the assets are expected to contribute directly or indirectly to the Partnership’s future cash flows. The estimated useful lives range from 4 to 30 years. Accumulated amortization of intangible assets was $19.1 million and $16.4 million as of September 30, 2016 and December 31, 2015, respectively. The Partnership assesses identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Partnership did not record any impairment of identifiable intangible assets for the three and nine months ended September 30, 2016 or the three and nine months ended September 30, 2015. |
Property and Equipment | (f) Property and Equipment Property and equipment are carried at cost except for (i) certain acquired assets which are recorded at fair value on their respective acquisition dates and (ii) impaired assets which are recorded at fair value on the last impairment evaluation date for which an adjustment was required . Overhauls and major improvements that increase the value or extend the life of compression equipment are capitalized and depreciated over 3 to 5 years. Ordinary maintenance and repairs are charged to cost of operations, exclusive of depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets as follows: Compression equipment, acquired new 25 years Compression equipment, acquired used 9 - 25 years Furniture and fixtures 7 years Vehicles and computer equipment 3 - 7 years Leasehold improvements 5 years When property and equipment is retired or sold, its carrying value and the related accumulated depreciation are removed from our accounts and any associated gains or losses are recorded on our statements of operations in the period of sale or disposition. |
Impairments of Long-Lived Assets | (g) Impairments of Long-Lived Assets We test long-lived assets for impairment when events or circumstances indicate that its carrying value may not be recoverable or will no longer be utilized in the operating fleet. The most common circumstance requiring compression units to be tested for impairment is when idle units do not meet the performance characteristics of the Partnership’s active revenue generating horsepower. During the nine months ended September 30, 2016, the Partnership evaluated the future deployment of its idle fleet under current market conditions and determined to retire and either sell or re-utilize the key components of 21 compression units, with a total of approximately 12,000 horsepower, that were previously used to provide services in the Partnership’s business. During the nine months ended September 30, 2015, the Partnership evaluated the future deployment of its idle fleet under current market conditions and determined to retire and either sell or re-utilize the key components of 166 compression units, with a total of approximately 58,000 horsepower, that were previously used to provide services in the Partnership’s business . In both periods, the cause of the impairment was related to certain performance characteristics of the impaired equipment, such as excessive maintenance costs and the inability of the equipment to meet current emission standards without retrofitting. We determined that this equipment was unlikely to be accepted by customers under current market conditions. This compression equipment was written down to its respective estimated salvage value, measured using quoted market prices, or the estimated component value of the equipment the Partnership plans to use. |
Fair Value Measurements | (h) Fair Value Measurements Accounting standards on fair value measurements establish a framework for measuring fair value and stipulate disclosures about fair value measurements. The standards apply to recurring and nonrecurring financial and non-financial assets and liabilities that require or permit fair value measurements. Among the required disclosures is the fair value hierarchy of inputs the Partnership uses to value an asset or a liability. The three levels of the fair value hierarchy are described as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Partnership has the ability to access at the measurement date. Level 2 inputs are those other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. Phantom unit awards granted to employees under the USA Compression Partners, LP 2013 Long-Term Incentive Plan (the “LTIP”) are accounted for as a liability, and such liability is re-measured on a quarterly basis. The liability is based on the publicly quoted price of the Partnership’s common units, which is considered a Level 1 input. Net assets (liabilities) measured at fair value on a recurring basis are summarized below (in thousands): September 30, 2016 December 31, 2015 Assets (Liabilities) Level 1 Level 1 Unit-based compensation liability $ $ As of September 30, 2016 and December 31, 2015, the Partnership’s financial instruments consisted primarily of cash and cash equivalents, trade accounts receivable, trade accounts payable, long-term debt and unit-based compensation liability. The book values of cash and cash equivalents, trade accounts receivable and trade accounts payable are representative of fair value due to their short-term maturity. The carrying amount of long-term debt approximates fair value due to the floating interest rates associated with the debt. |
Operating Segment | (i) Operating Segment The Partnership operates in a single business segment, the compression services business. |
Pass Through Taxes | (j) Pass Through Taxes Sales taxes incurred on behalf of, and passed through to, customers are accounted for on a net basis. |